The lucky man of mining

Just six years after starting FTSE 250-listed Talvivaara, using largely untried techniques to extract nickel, Pekka Pera is becoming a major player in the mining industry.
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Pekka Pera knows he is a fortunate man. The chief executive of FTSE 250-listed Talvivaara Mining says that he "thanks his lucky stars" for the course of events that has propelled the company he founded and in which he still has a 23.3 per cent stake into the mining big league. And that is even before its one site in Finland goes into full production.

After launching the nickel group in August 2003, he admits that even he is surprised by its success.

"There's a lot of nitty gritty you don't understand at the start, even if you do have a strong background in the industry," says Mr Pera, who is a mining engineer by training. "In the early days we were lucky to have enough money from my pocket, my father's pocket and various other places, to hire the key people. But even so, it's a bit of a challenge when you start with nothing and know you need $500m to get things off the ground."

The group owns a huge plot of land in central Finland, 100km west of the Russian border, and a matter of a few miles south of the Arctic Circle. Except for the mine, there is little in the region around the small town of Kajaani, apart from trees, lakes and in winter, vast amounts of snow and ice.

But according to Mr Pera, the location of the mine may be Talvivaara's biggest asset. Finnish unemployment stands at 7.3 per cent, but in the region around Kajaani the jobless total was running at more than 17 per cent when the group first began talks with the Finnish government in 2004: "It was the only part of Finland that was not booming back in those days," he says.

The high unemployment rate, and associated social problems in the region, was the main reason the Finnish government sped through an environmental assessment of plans for the mine, he thinks, signing it off within a year, when the bureaucratic process normally takes more than three.

There was yet more good fortune when the company signed a project financing deal days before the onset of the credit crisis, while the Finnish arm of the Russian nickel giant Norilsk Nickel penned an agreement to buy all of Talvivaara's nickel and cobalt output, "on just the strength of a slide show".

When the company was floated in London in 2007, the listing came in the same week as his one customer's buyout of LionOre for $5.2bn, a level Mr Pera describes as "the wrong price, so we got a lot of valuation through that and the nickel price peaking".

Perhaps the biggest slice of good fortune, however, came when Talvivaara hired its 68-year old former chief technology officer, Marja Riekkola-Vanhanen, a mining doyenne in Finland, who is now employed by the group as a consultant after passing the legal retirement age.

The need for Ms Riekkola-Vanhanen's expertise becomes obvious when you visit Talvivaara's vast operation. The group has a licence to excavate a vast area of Finland's countryside, but the asset, from a mining perspective, is dull, low-grade and in most cases uneconomic.

Ms Riekkola-Vanhanen spent more than a decade before joining Talvivaara researching a process known as bioheapleaching, where finely crushed ore is left in a huge heap and treated with a low-cost bacterial solution which takes 18 months to extract the ore. Talvivaara is building one such heap at present, which when complete will measure 2,400m by 800m. It has plans to build two more, even bigger heaps. "She wasn't being taken that seriously, and we made her an offer she couldn't refuse," says Mr Pera, after being asked how difficult it was to persuade Ms Riekkola-Vanhanen to join his project.

The group is now the only company in the world to use the process at a nickel mine, which allows its low-grade resources to be profitable. "Because of our example, we get a lot of calls from people who think they might be able to use it, but in many cases the conditions are not right. However, there are other metals at our site, particularly manganese, that can probably be extracted profitably using this process."

Despite conceding that luck has played a large part in Talvivaara's success, Mr Pera works hard, talking constantly, he says, to employees at the mine, to people at the head office in Helsinki, or in London which he visits to meet investors.

If it all sounds like plain sailing, Mr Pera does not give the impression that he worries about much, especially given the speed with which the company has grown. One side-effect of his success, however, has been the increased scrutiny he has personally endured.

"We are the biggest industry group in Kajaani, and especially since we listed in Finland [Talvivaara took a dual listing on the Helsinki stock exchange earlier this year], there has been some unwanted publicity.

"I've almost become a public target. You can see the market capitalisation of the company and my personal shareholding, and that has not been nice. Last year there were almost 600 articles in the local press."

Talvivaara has a market capitalisation of nearly £900m, making his stake in the group worth around £200m.

There have been other setbacks, too. The Co-operative's asset management unit ranked the group in the bottom 20 of the FTSE 350 in terms of corporate governance in 2008, with particular concern about Talvivaara's disclosure. Likewise, there has been disquiet about Talvivaara's links with Norilsk Nickel, which has a 5 per cent share in the company. The Russian company has been widely criticised by environmental campaigners, and "for a reason," says Mr Pera, who adds that the mining sector has a poor reputation anyway. "People are pretty dubious about mining, thinking we are always polluting lakes, killing all the fish and whatever else," he says.

He does give the impression that the criticism does not leave lasting damage, however, and is not shy when it comes to courting controversy.

While saying that Talvivaara likes to have a good image, he argues that some projects undertaken by rivals to promote, for example Aids work in Africa, is "bullshit". "The promotion of these things is a PR exercise, and in fact keeping a healthy workforce is a commercial necessity for these companies. It is not just them being nice."

As for the future, Mr Pera says he is not bored yet, and has at least another five years of "active management". He adds that the group has a "two or three-year head start" on competitors who might want to copy Talvivaara's bioheapleaching process, and in that time he wants to expand the company, both at the current mine and at new sites. Would he listen to offers from bigger mining companies that might not be prepared to wait that long?

"For the right price, I would sell my wife and kids, and had you told me at the start that we'd have had this much success, I would have been very surprised. But we still have a lot to achieve here."

Pekka Pera: A life in mining

*Pekka Pera founded the Talvivaara Mining Company in 2003, and got a licence to mine in 2005. It listed in London in 2007, gaining an additional listing in Helsinki earlier this year, and now has 15,000 shareholders.

*Before starting Talvivaara, Mr Pera worked as a project manager at Artic Platinum Partnership, between 2001 and 2003.

*Before joining Artic, he was the start-up project manager at another Finnish miner, Pyhasalmi, joining the group in 1999.

*After leaving university in 1991, Mr Pera held various positions at Outokumpu Group, working in Finland, Ireland and Australia. At the time, Outokumpu had a licence to research in area now mined by Talvivaara.

*Mr Pera was educated at the Technical University of Helsinki, and got an MSc in mining engineering.

*Born in 1964, Mr Pera lives in Helsinki and is also looking for a house in London. He is married with two children. In his spare time, he enjoys reading, getting through a book each week. He is currently reading a biography of Adolf Hitler.